Change Management Royal Mail

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INTRODUCTION

With 310 stores and 1500 employees throughout France, The Phone House is the number one retailer independent telecommunications in France. With its multi-approach, The Phone House has developed a unique expertise in all segments of the telecom market: 2G and 3G mobile telephony, fixed telephony, broadband internet, offers double, triple and quadruple play and now offers dual GSM-Wi-Fi. The Phone House France is a subsidiary of The Carphone Warehouse (listed in London). Based on its total independence from manufacturers, operators and intermediaries, the strategy of The Phone House France is based on the priority given to the client and the impartiality of the board. (www.thephonehouse.fr)

With the purpose of maintaining good customer relation, TPH works hard for high customer service standards in their shops. The five mission statements of the company are the following.

If you do not look after the customer, someone else will.

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Nothing is gained by winning an argument but losing a customer.

Always deliver what you promise. If in doubt, under-promise and over-deliver.

Always treat customers, as you would like to be treated.

The reputation of the whole company is in the hands of each individual.

TPH set out its strategy to built services based its customer base, CRM and retail network. The company's primary future strategic approach is based on three primary objectives:

To continue to grow market share in all the geographical markets on which they are by investing in new stores opening, achieving increasing productivity from their existing estate and developing additional distribution channels.

To maximize the lifetime value of their customers, both by providing a level of service that encourages repeat business and by identifying relevant new products and services where the brand services and distribution give them an edge over other suppliers.

To become the leading alternative provider telecommunications service. [1] 

ORGANIZATIONAL STRUCTURE OF TPH

Figure 1: Organizational Chart of TPH

The Phone House

Purchasing Department

Insurance Issues Department

Real Estate and Franchising Department

Marketing Department

Auditing Department

Source: Adapted from Organizational Structure of TPH

The organizational structure of TPH is based on the functional performance. TPH departments are created to fulfil the organizational functions such as purchasing department are responsible for negotiation and buying from mobile network operators (MNOs) and handset manufacturers and maintaining margin. Similarly, the second department take care of insurance related issues. The third department negotiates lease and the right to utilize shops. Auditing Department monitors to the function of the company in real-time inspects whether targets were met and implements appropriate changes. Likewise, marketing department looks after every aspects of marketing.

MANAGEMENT IN TPH

Good management, in any organization, plays a vital role in the overall development of the entity. The performance of the institution and its employees depends upon the management style adopted by the organization. Management, in the growing organization like TPH, is crucial element for the long-term development of the company. It is not so necessary have an outstanding ability to lead the organization to achieve the goal but what necessary is how you manage it.

Drucker (n.d.) has stated that no institution can possibly survive if it needs geniuses or supermen to manage it. It must be organized in such a way as to be able to get along under a leadership composed of average human beings.

In today's competitive business world, organisations are not only facing challenges of greater complexity than before, they have to deal with them in an operating environment in which the pressure of competition is ruthless, and the rate of change is increasing. To be successful and to survive in the market, organisations need outstanding leaders who can deliver, consistently, the highest levels of organisational performance to meet the organizational objective. Leaders who combine a drive for high performance with an almost obsessive focus on people can lead the organization in long run. TPH is a highly growing organization intending to be a market leader in the industry. In order to achieve its objective, TPH has to be managed properly in every aspect. As employees are the greatest assets of the organization, top-level management of TPH should always focus on satisfaction of human resources. Karamanos (2008) in his case study mentioned that the growth in the number of outlets and improved customer service requires a growth in skilled personnel, so TPH human resource strategy is crucial to the success of the company. In the present scenario, as the economy is knowledge based, transactional leadership style will not work in long term. Therefore, TPH should use transformational style of management where human resources are equally involved in every issues of the company. Every day should be the learning days for the workers, which can build enthusiasm to the great extend towards the job provided. Strategic Level managers should try to transform the operational employees by providing training and development for their career development.

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Figure 2: Transformational Leadership (Management) Framework

Individual Consideration

Intellectual Stimulation

Inspirational Motivation

Idealised Influence

Charismatic Leader

Transformational Leadership

Source: Adapted from management books.

The leaders of the phone house should bear some charismatic characters such as charm and grace, self-beliefs, clear vision etc. TPH leaders must use wide range of methods to manage their image and, if the ones are not naturally charismatic, may practice attentively at developing their skills. The leaders may create trust through visible self-sacrifice and taking personal risks in the name of their beliefs. One must show great confidence in their followers and must be extremely influential and make very effective use of body language as well as verbal language.

TPH should manage to build genuine trust between the leaders and operating employees. The idealised influence is characterised by high moral and ethical standards.

Furthermore, to get the job done in proper manner, human resource should be entirely inspired by the management of the organization. So as to motivate the employees, leaders of TPH should provide the challenging jobs and engage the workers in shared goals and undertakings. Moreover, financial and non-financial rewards can be provided to the work force for the good work done. As stated by Karamanos (2008), Ninety percent of TPH managers are hired through internal promotion, which shows the focus of TPH's management in motivating employees by admiring the good work done by them.

Intellectual stimulation helps followers to question assumptions and to generate more creative solutions to problems. TPH regularly consult with employees to get their view on issues concerning their human resource policies. [2] TPH should not only take view for human resource policy but also try to involve operating employees in decision-making.

TPH has developed a school of selling called "The Phone School" which allows sellers to develop skills and build long-term career paths within the company. [3] Adopting the transformational leadership style, leaders of TPH should treats each follower as an individual and provide coaching, mentoring and growth opportunities. Using this method can develop next generation of leaders and fulfils the need to self-actualisation of the workers. TPH can use on the job trainings programmes to educate staffs for the effectiveness of the job to be done.

KEY FACTORS CONTRIBUTORY TO THE PROGRESSIVE FINANCIAL PERFORMANCE OF THE PHONE HOUSE

The phone house, in current context, is a rapidly growing company with major market share in the industry. Being the subsidiary company of The Carphone Warehouse, it has made a progressive development in its financial performance. The major reason behind the success of TPH can be identified as under.

Increasing number of outlets: The Phone House distribution network is rapidly growing which contributes towards the better financial performance of the organization. Started in 1996 with first shop at Avenue de Wagram Paris, it has come across with 310 stores until date. In order to grow its market share, TPH is planning to increase the number of outlets to 650 by the end of 2010 focusing on high street and shopping centres.

Figure 3: Number of shops of The Phone House during the years.

Source: Adapted from the case study 'The Phone House in 2000-2007' by Karamanos (2008)

Competitive Price of the Product: TPH sells its own mobile phone packages at competitive price by buying talk-time from Mobile Network Providers (MNOs) and Mobile Virtual Network Providers (MVNOs) and SIM-free handsets from Original Equipment Manufacturers (OMEs) like Nokia, Motorola etc, MNOs and MVNO's. Its goal is to offer the same service package as an MNO outlet, but with the choice of different handsets. By buying talk-time in bulk, TPH gets discounts from MNOs, if they reach a certain quantity per month. Furthermore, SIM-free handsets are purchased in cheaper rate from OMEs. In addition, OMEs gives annual bonus to TPH if it can reach the targeted sales. Discounts from MNOs and Annual Bonus from OMEs facilitate TPH to sell the product in lower price to the customers that increases the sales of the organization and finally hits the profit high. Besides, TPH also negotiates with the network provider to bring the price low and to make their offer more attractive.

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Cross Selling of the Product: Cross Selling is very effective way to increase the sales turnover of the organization. The sale of one-euro phone is not workable business model for retailers and it is hardly a secret that accessories yield substantially better margin than devices themselves [4] . TPH sells mobile handsets with or without network connections and, in addition, they sell the accessories like Bluetooth, earphone etc which generates additional sales volume and higher return.

The comparative analysis of The Phone House and The Carphone Warehouse in term of financial position is mentioned as under.

Table 1: Profit Margin of The Phone House France

Million US $

2006

2005

2004

2003

Sales

353.60

277.30

242.30

178.70

Net Profit

6.473

9.252

28.909

5.501

Net Profit Margin Ratio

1.83%

3.34%

11.93%

3.08%

Source: Karamanos, A., 2008. The Phone House in 2000-2007. ESSEC Business School, Paris Singapore, p.18

Table 2: Profit Margin of The Carphone Warehouse

Million £

2006

2005

2004

2003

Sales

3046.40

2355.09

1849.01

1841.52

Net Profit

109.39

66.41

48.13

35.87

Net Profit Margin Ratio

3.59%

2.81%

2.60%

1.94%

Source: Annual Reports of The Carphone Warehouse

During the year 2003-2006, the turnovers of both companies are in increasing trend and so does the net profit. Nevertheless, the net profit margin of TPH is not consistent as compared to The Carphone Warehouse. The TPH has earned 11.93% of net profit in year 2004, which is substantially high than other years. It may be due to different factors like the organization must have made considerable profit on sale of assets or the company may have incurred very low amount in its expenses (administrative expenses, interest expenses etc) or the entity may have gain a lot in other income. On the other hand, TPH net profit margin in year 2006 is 1.83% that indicates that the organization has not achieved reasonable profit as compared to The Carphone Warehouse's margin of profit. Analyzing the net profit margin of The Carphone Warehouse, it is in increasing trend with respect to its sales, which shows that the enterprise is making good money from the sales. While the sale was $1841.52 million in year 2003, it was making profit of 1.94%, which then increased to 3.59% when the sale was $3046.40 million in year 2006.

The indication of low profit margin of TPH when compared to The Carphone Warehouse may be due to three reasons. The first is, TPH is spending high amount in its COGS, Expenses and Taxes, so could not able to get enough profit on its sales. In order to achieve significant margin on its sale, TPH should try to find the ways to reduce these three elements of its income statement. In the second reason, TPH may be trying to maintain the low margin in its sales to increase sales volume, which will definitely be helpful to the enterprise to gain higher profit in long run. This can be the greatest strength to the entity to gain major market share. The company is trying to provide mobiles in cheaper rate to the customers to gain the customer loyalty. Maximizing customers' lifetime value can be very much fruitful to capture market share and to be the market leader. The third reason behind low net profit margin of the company can be the increasing number of outlets year by year. TPH is trying to reach every individual customer by opening shops in different areas that, in fact, affects the profit of the organization. On the same time, increasing shops may not generate enough return on investment to the company at present, but, in long run, TPH can get enough profit from the shops opened. In contrast, the strength of The Carphone Warehouse is its increasing sales. In the same time, the margin of profit of the company is also in boosting treand.

The competition in the mobile market is growing which is generating challenges to both companies. As mentioned in the case study of Karamanos (2008), since 2004, TPH is active in fixed telephony when it launched the talk-talk service. March 2004 saw the first move of the The Carphone Warehouse into the continental European fixed line market with acquisition of Xtra Telecom in Spain. On the other side he has also mentioned that as fixed based telephony is facing a real decline, the growth of new mobile phone connections is slowing down and internet is blooming and the players of the telephony market are noe looking for new opportunities. This means the decline of fixed telephone can be the real threat to both companies. At the same time, if the MNOs drop the retail deal with the companies as Vodaphone and Orange did, can create great problem for the enterprises. Therefore, TPH and The Carphone Warehouse should not only focus on gaining the customers loyalty but also should try to maintain reliable relation with MNOs, MVNOs and OMEs.

FINANCIAL VIABILITY OF THE CARPHONE WAREHOUSE

Financial viability is about being able to generate sufficient income to meet operating payments, debt commitments and, where applicable, to allow growth while maintaining service levels [5] . The Carphone Warehouse is rapidly growing organization with considerable growth in sales and profit. In order to determine its financial viability in short and long term the following data has abstracted.

Table 3: Financial Figures of The Carphone Warehouse

Amount in £ Million

2006

2005

2004

2003

Current Assets

795.85

574.61

433.56

306.58

Current Liabilities

864.95

574.44

400.14

275.31

Total Debt

326.74

171.28

166.04

87.34

Total Equity

619.00

502.94

471.84

455.59

Current Ratio

0.92:1

1:1

1.08:1

1.11:1

Debt to Equity Ratio

52.78%

34.06%

35.19%

19.17%

Source: Annual Reports of The Carphone Warehouse

Short Term Viability: Short-term viability of the company can be measured by current ratio. In the context of The Carphone Warehouse, the current ratio over the period 2003-2006 is in decreasing trend. Where it was 1.11 times in year 2003, it felled to 0.92 times in year 2006, which indicates the company short term liquidity position is in risk. If the trend remains the same, the company may face liquidity crises, which will lead incapability of the company to meet the short-term obligation. Therefore, The Carphone Warehouse should always try to maintain the current ratio at least 1:1 so that the investors may be satisfied about the liquidity of the company.

Long Term Viability: The debt to equity ratio of the company is increasing which means investment in assets are financed through debt rather than the shareholders capital which is not the good indicator to the entity. In year 2006, the ratio is 52.78%, which shows the company is using more than fifty percent debt. Generally, 50% of debt equity ratio is considered satisfactory, but, in the case of The Carphone Warehouse, it exceeds fifty percent that shows company may not be viable in investors' point of view. As a result, the investors may be reluctant to invest in the company that can lead the company to risky position. Therefore, The Carphone Warehouse should use shareholders equity rather than debt to finance its assets.

In contrast, the Earning per Share (EPS) and Dividend per Share (DPS) of the company is trustworthy and can be said to be in viable position. It is a good sign for the company its increasing EPS and DPS. Investors are always focused return of their investments and increasing EPS and DPS can lead the company to the better position from investors' point of view.

Figure 4: EPS and DPS position of The Carphone Warehouse.

Source: Annual Reports of The Carphone Warehouse.

CONCLUSION

Although The Phone House and its mother company The Carphone Warehouse is doing well in the present context, management should be always focus on the performance of the companies. The growing competition in the market should be the center of attention for the companies, as the MNOs and MVNOs are trying to reach the prospective customer through its own outlets. Moreover, these organizations should maintain a genuine relationship with customers and well as with MNOs, MVNOs and OMEs to gain long-term stability in the market. In addition, the companies should always try to squeeze its COGS, expenses and taxes with competitive price of the product to gain higher return on the investment. Opening several shops in different location is not enough to gain the potential customers; the entities should maximize the customers' lifetime value as well as motivate employees for the growth of the organization.

SELECTED REFERENCES

WEBSITES

http://www.thephonehouse.fr/instit.php?page=societe_tph [Accessed 27th May 2010]

http://www.cpwplc.com [Accessed 27th May 2010]

http://en.thinkexist.com/quotes/Peter_F._Drucker/ [Accessed 27th May 2010]

http://leadership.au.af.mil/documents/homrig.htm [Accessed 28th May 2010]

http://www.callcentres.net/CALLCENTRES/LIVE/me.get?SITE.sectionshow&CALL1303 [Accessed 28th May 2010]

http://www.rch.nsw.gov.au/NR/rdonlyres/F54F4338-56D4-4753-A6D7-68AEFF73 D5C2 /0/Financialviabilityweb.pdf [Accessed 28th May 2010]

ANNUAL REPORTS

The Carphone Warehouse, 2006. Annual Report 2005-2006. [Online]

Available at: http://www.cpwplc.com/phoenix.zhtml?c=123964&p=irol-reports [Accessed 28th May 2010]

The Carphone Warehouse, 2005. Annual Report 2004-2005. [Online]

Available at: http://www.cpwplc.com/phoenix.zhtml?c=123964&p=irol-reports [Accessed 28th May 2010]

The Carphone Warehouse, 2004. Annual Report 2003-2004. [Online]

Available at: http://www.cpwplc.com/phoenix.zhtml?c=123964&p=irol-reports [Accessed 28th May 2010]

The Carphone Warehouse, 2003. Annual Report 2002-2003. [Online]

Available at: http://www.cpwplc.com/phoenix.zhtml?c=123964&p=irol-reports [Accessed 28th May 2010]

CASE STUDIES

Karamanos, A., 2008. The Phone House in 2000-2007. ESSEC Business School Paris Singapore